Joint Venturing One method is joint venturing.

This is where two companies take equity from their companies and join it together to form a type of partnership. The partnership is a new entity separate from either business. Companies form these partnerships for single projects and also to form permanent partnerships. The important thing is that they do not report any debt in their original businesses because the partnership is considered a separate entity, thus keeping investors happy and stocks strong. Research and Development Partnerships Research and development partnerships can be created similarly to a joint venture, except this partnership is made in order to create a new technology or method. Contracts are created in order define who will maintain what part of the technology or how it will be shared after the partnership is dissolved. Most importantly, this allows companies to join together to create technologies and avoid incurring debt that could scare off investors. When creating partnerships and using off-balance-sheet financing, companies should make sure that they are inside the bounds of both federal and state laws. The sudden collapse of energy-trading giant Enron Corporation is attributed in large part to the firm's off-balance-sheet financing through multiple partnerships. Case Study The sudden collapse of energy-trading giant Enron Corporation caught regulators, politicians, lenders, analysts, and the public by surprise. In large part the surprise resulted from the billions of dollars of debt the company had been able to hide by using offbalance-sheet financing through hundreds of partnerships. The hidden liabilities allowed Enron to maintain the appearance of a rapidly growing but financially stable company until near the very end, when bankruptcy was imminent. Enron's financial arrangements were complicated and sometimes entailed transferring overvalued assets to partnerships which it had a controlling interest in but was not required to include on its own balance sheet. The partnerships,

with minimal equity capital from outside investors, raised most of their capital from loans using Enron stock, transferred assets, or pledges from Enron as collateral. Although Enron used aggressive accounting methods, many of the accounting techniques it employed were not illegal. For this the accounting profession was called to task.